Key Practice Indicator Tool #2: Total $ per RVU

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Key Practice Indicator Tool #2: Total $ per RVU

One accurate measurement is worth a thousand expert opinions.” Rear Admiral Grace Hopper (1906-1992)

Ok, folks, Days in AR: got it, KPI Tool #1. KPI Tool #2 – RVUs. How do they help with money in the door?

Eh? Thought I. What are RVUs?

“RVUs” said Carina cautiously, “stands for Relative Value Units”.

“Thanks for the clarification, Carina” I said. “I think I know less than before”.

“Ask a Painter” she said, laughing. Now, the Painters know: they’ve been involved with RVUs since RVU inception; written manuals on RVU use and practice; been engaged on state and Federal legislative levels for RVU formulation since the 1980s; written the best software out there (Coding Today) to help physician offices navigate the RVU coding maze.

They’re going to clear it up for me!

“Relative Value Units (RVUs)” intoned Dr. Professor Ray Painter, “are a national standard used for measuring productivity, budgeting, allocating expenses, and cost benchmarking.”

“Only the government” I sighed, “could come up with that obtuse a term”.

“Well” said Ray, “what’re they gonna do? They gotta come up with something to value all this appropriately: after all, medical expenses now represent trillions of dollars a year, around a third of our GDP!”

“Gotcha” I replied, eyes wide, forehead wrinkled, “But I’m just trying to figure out how to use an RVU as a KPI so… what are RVUs?”

“RVUs” responded Mark Painter, “represent the relative amount of physician work, resources, and expertise needed to provide services to patients.”

“RVUs” chimed in Scott Painter, “are like a Blue Book for procedures. How many units of relative value should a procedure have?”

“Ah HA!” I shouted, desperately holding onto my heaving intellectual raft: “RVUs is a Blue Book? Like for when I want to sell a car?”

“Now you’re getting there” said Mark, approvingly, “except RVUs don’t represent money, but value. Want to know how much you should get paid for an office visit? Or a procedure in the hospital? Start with RVUs because then you’re working with national value standards established by CMS.”

“Right!” said Ray. “Now, instead of coming up with some sort of cockamamie fee schedule, you can actually justify what you’re charging for an office visit… And not only justify but negotiate with insurance companies for reasonable contract rates.”

“Oh HO!” I said. “Now we’re getting to it! Contracts – but I digress, that’s a whole other ball of wax, ain’t it?” Yes, they all three chorused. “Besides” they laughed, “we don’t want to stress you out: there’s already too much smoke coming out of your ears.”

“However,” continued Mark “Let’s say you’ve got an office. First, you gotta figure out what the total relative value of an office visit is; once you know that value, you can figure the cost.”

The RVU Formula

I’m blinking away, following as best I can while Mark happily rattles away:

“Total RVU (tRVU) takes into account 3 components: work RVU (wRVU), practice expense RVU (peRVU), and malpractice RVU (mRVU). You also gotta take into account” Mark continued blithely over my groan, “modifiers and other technical components, as well as geographical practice cost index (GPCI), but now you’ve got your total RVU!”

Total-RVU = (wRVU x wGPCI) + (peRVU x peGPCI) + (mRVU x mGPCI)

Total RVU, I thought, seriously. I studied the formula. “That’s a lot of GPCI, no?” I said. Yep, they nodded: there’s a lot of regional price discrepancy: NYC is a helluva lot more expensive than Albuquerque.

But hey, gang: there’s the formula for your total RVU. Now what?

Well, Payment = (Total RVU) x (CF for the year in question).

Ok, here we go, brace yourselves: I’m gonna ask what CF is… “Conversion factor!” said Scott. “Dollars per RVU. That’s published by CMS.”

Calculating Using the Formula

I gotcha! Plug in the RVU numbers for a 99223 to see what you get paid:

Physician Work RVU = 3.78

Practice Expense RVU = 1.11

Malpractice RVU = 0.13

Total RVU =5.02 for a 99233.

The use Colorado GPCI: 1.0 for work RVU, 0.89 for practice expense and 0.492 for malpractice.

Enter your data (2018 data used here, and “BTW” said Mark, “it’s all changing next year so don’t get too comfortable!”)

(1*3.78)+(0.89*1.11)+(0.492*0.13)*$35.9996=$182.30 is your Medicare payment… your head hurting yet?

 

RVU formula

Result

pwRVU (1*3.78)

3.78

peRVU (.89*1.11)

0.9879

mpRVU (0.492*0.13)

0.06396

Total SUM w/CF

(B2:B4)*35.9996

$173.945

 

Conclusion

But look at how valuable this information could be in building a fee schedule, or figuring out which procedures pay best, or giving you a baseline figure in contract negotiations with commercial payors!

However, this isn’t using RVUs as a KPI… how do I use RVUs as a KPI? Well, RVUs can help you forecast an increase or drop in revenue next year. How? Let’s say CMS is going to cut RVUs for a procedure the office performs often. “Uh oh”, I say to myself, “time to make some adjustments before all hell breaks loose”. But hey, because I know my $ per RVU inside and out I can look at my procedure mix, make some adjustments, and be ready for that particular revenue hit. Hey presto – cooking with gas!

Or maybe a physician’s RVUs have gone up while their procedure count has gone down, so they’re actually making MORE money: working smarter, not harder, just like everybody always preaches. Awesome, let’s examine the associated procedure/office visit mix and spread that protocol to the rest of my physicians! $ per RVU!

Hey, which physician in the office is contributing more RVUs to the bottom line? Let’s build that into their compensation package and give them a bigger bonus, get some friendly coopetition going between my providers… $ per RVU.

Another scenario: Let’s say a physician performed 30 procedures at the office, each of which were worth 4 RVUs; or alternatively performed 4 procedures at the hospital, each of which were worth 19 RVUs. That’s a no-brainer, folks: working at the office for the day was worth 120 RVUs; working at the hospital for the day was worth 76 RVUs. If an RVU = $174 that’s one heckuva an income delta: by those numbers a doc makes $2,000 a day more working in the office rather than doing surgery. $2,000 dollars, greenbacks, coin, PER DAY: $ per RVU. “Surgery’s not looking so great, is it?” I say to an ornery doctor who thinks they make more money in surgery. There’s a shocker! Who woulda thunk it?

“I would” said Marianne, “that’s why the OR is an expensive hobby!”

Gotta love our billing manager – she’s been at this too long. KPI #2, Total $ per RVU, check!